Marcus Junianus Justinus
Historiarum
Philippicarum libri XLIV – Liber
III
Dum
haec in Persis geruntur, interea Graecia omnis ducibus Lacedaemoniis
et Atheniensibus in duas diuisa partes ab externis bellis uelut in
uiscera sua arma conuertit. Fiunt igitur de uno populo duo corpora,
et eorundem castrorum homines in duos hostiles exercitus diuiduntur.
Hinc Lacedaemonii communia quondam ciuitatum auxilia ad uires suas
trahebant, inde Athenienses et uetustate gentis et gestis rebus
inlustres propriis uiribus confidebant. Atque ita duo potentissimi
Graeciae populi institutis Solonis et Lycurgi legibus pares ex
aemulatione uirium in bellum ruebant. Namque Lycurgus cum fratri suo
Polydectae, Spartanorum regi, successisset regnumque sibi uindicare
potuisset, Charillo, filio eius, qui natus postumus erat, cum ad
aetatem adultam peruenisset, regnum summa fide restituit, ut
intellegerent omnes, quanto plus apud bonos pietatis iura quam omnes
opes ualerent. Medio igitur tempore, dum infans conualescit
tutelamque eius administrat, non habentibus Spartanis leges
instituit, non inuentione earum magis, quam exemplo clarior: siquidem
nihil lege ulla in alios sanxit, cuius non ipse primus in se
documentum daret. Populum in obsequia principum, principes ad
iustitiam imperiorum formauit. Parsimoniam omnibus suasit, existimans
laborem militiae adsidua frugalitatis consuetudine faciliorem fore.
Emi singula non pecunia, sed conpensatione mercium iussit. Auri
argentique usum uelut omnium scelerum materiam sustulit.
When
Lycurgus had succeeded Polydectes his brother, king of the
Lacedaemonians, and might have secured the kingdom for himself, he
restored it, with the noblest integrity, to Charilaus, the posthumous
son of Polydectes, as soon as he became of age; that all might see
how much more the laws of integrity prevail with good men than all
the charms of power. In the meantime, while the child was growing up,
and he had the guardianship of him, he composed laws for the
Spartans, who previously had had none. Nor was he more celebrated for
the making of these laws, than for his exemplary conformity to them;
for he imposed nothing by law upon others, of the observation of
which he did not first give an example in his own conduct. He trained
the people to be obedient to those in authority, and those in
authority to be just in the exercise of their government. He enjoined
frugality on all, thinking that the toils of war would be made more
endurable by a constant observance of it. He ordered all purchases to
be made, not with money, but by exchange of commodities. The use of
gold and silver he prohibited, as being the origin of all evil.
Administrationem rei publicae per ordines
diuisit: regibus potestatem bellorum, magistratibus iudicia et annuos
successores, senatui custodiam legum, populo sublegendi senatum uel
creandi quos uellet magistratus potestatem permisit. Fundos omnium
aequaliter inter omnes diuisit, ut aequata patrimonia neminem
potentiorem altero redderent. Conuiuari omnes publice iussit, ne
cuius diuitiae uel luxuria in occulto essent. Iuuenibus non amplius
una ueste uti toto anno permissum, nec quemquam cultius quam alterum
progredi nec epulari opulentius, ne imitatio in luxuriam uerteretur.
Pueros puberes non in forum, sed in agrum deduci praecepit, ut primos
annos non in luxuria, sed in opere et in laboribus agerent. Nihil eos
somni causa substernere et uitam sine pulmento degere, neque prius in
urbem redire quam uiri facti essent, statuit. Virgines sine dote
nubere iussit, ut uxores legerentur, non pecuniae, seueriusque
matrimonia sua uiri coercerent, cum nullis frenis dotis tenerentur.
Maximum honorem non diuitum et potentium, sed pro gradu aetatis senum
esse uoluit, nec sane usquam terrarum locum honoratiorem senectus
habet.
He
divided the administration of the government among the several
orders; to the kings he gave the power of making war, to the
magistrates the seats of justice in yearly succession; to the senate,
the guardianship of the laws; to the people, the power of choosing
the senate, or of creating what magistrates they pleased. The lands
of the whole state he divided equally among all, that equality of
possession might leave no one more powerful than another. He ordered
all to take their meals in public, that no man might secretly indulge
in splendour or luxury. He would not allow the young people to wear
more than one dress in a year, nor anyone to walk abroad in finer
garments than another, or to fare more sumptuously, lest imitation of
such practices should lead to general luxury. He ordered boys to be
carried, not into the forum, but into the field, that they might
spend their early years, not in effeminate employments, but in hard
labour and exertion; not suffering them to put any thing under them
to sleep upon, or to live on high seasoned food, and forbidding them
to return into the city till they arrived at manhood. He caused
virgins to be married without portion that wives, not money, might be
sought; and that husbands might govern their wives more strictly,
being influenced by no regard to dowry. He ordained that the highest
respect should be paid, not to the rich and powerful, but to the old,
according to their degrees of seniority; nor had old age, indeed, a
more honourable habitation anywhere than at Sparta.
Haec quoniam primo solutis antea moribus dura
uidebat esse, auctorem eorum Apollinem Delphicum fingit et inde se ea
ex praecepto numinis detulisse, ut consuescendi taedium metus
religionis euincat. Dein ut aeternitatem legibus suis daret, iure
iurando obligat ciuitatem, nihil eos de eius legibus mutaturos,
priusquam reuerteretur, et simulat se ad oraculum Delphicum
proficisci, consulturum quid addendum mutandumque legibus uideretur.
Proficiscitur autem Cretam ibique perpetuum exilium egit abicique in
mare ossa sua moriens iussit, ne relatis Lacedaemonem solutos se
Spartani religione iuris iurandi in dissoluendis legibus
arbitrarentur. His
igitur moribus ita breui ciuitas conualuit ut, cum Messeniis propter
stupratas uirgines suas in sollemni Messeniorum sacrificio bellum
intulissent, grauissima se execratione obstrinxerint, non prius quam
Messeniam expugnassent reuersuros, tantum sibi uel de uiribus suis
uel de fortuna spondentes.
But seeing that such laws would at first be thought severe,
as the state of manners had previously been relaxed, he represented
that Apollo of Delphi was the author of them, and that he had brought
them from thence at the command of the deity, in order that reverence
for religion might overbalance the irksomeness of compliance with
them. And to secure perpetuity to his laws, he bound the city by an
oath “to make no change in them till he should return,”
pretending that he was going to ask the oracle at Delphi whether any
thing seemed necessary to be added to his institutions, or changed in
them. But he went in reality to Crete, and continued there in
voluntary exile; and, when he was dying, ordered his bones to be
thrown into the sea, lest, if they were taken back to Lacedaemon, the
Spartans might think themselves absolved from their oath respecting
alteration in his laws. Under
such a state of manners, the city acquired, in a short time, such a
degree of strength, that, on going to war with the Messenians for
offering violence to some of their maidens at a solemn sacrifice of
that people, they bound themselves under a severe oath not to return
till they had taken Messene, promising themselves so much either from
their strength or good fortune.
________________________________________________________________________
Can bankers be trained to
be obedient to those in authority? Should they take their meals in
public? One dress in a year? Would all this make LIBOR become more
accurate? Today, the above techniques would probably not prosper.
Therefore, Martin Wheatley had to turn to other solutions. His recent
report sticks to the following six questions:
Should we regulate
LIBOR?
How should LIBOR be
constructed?
How could LIBOR’s
governance structure look like?
Are there
alternatives to LIBOR?
How should we
accomplish the transition period to new regulation?
Which sanctions
should encompass the new LIBOR fixing?
1. Should we
regulate LIBOR?
Yes! “LIBOR
administration should also be a regulated activity.”, says the
report. In the authors' view, this is necessary to counter the risks
of potential manipulation. Not only should the conduct of firms and
individuals involved in the LIBOR process be subject to supervison;
but regulatory action for misconduct is also necessary.
However, to avoid any
uncertainty of interpretation of existing contracts, the intention is
to „reform rather than replace“ LIBOR.
On the merits, the new
regulation shall cover the production of submissions; the calculation
of the benchmark; and its publication.
2. How should LIBOR
be constructed?
Martin Wheatley and his
team address five major issues as regards LIBOR construction:
Over a 12-month
transition period, LIBOR's number of currencies and maturities
should be reduced. This should apply to those currencies and tenors
for which there is insufficient trade data to corroborate
submissions and, ultimately, will reduce published benchmarks from
150 to 20.
The banks providing
LIBOR submissions will need to put in place, at manager level, a
„controlled function“ (Whatever this means...) for the
LIBOR administration process. Contributors shall come from the
banks' liquidity and liability management.
3. How could
LIBOR’s governance structure look like?
Today, LIBOR suffers of
insufficient
independence of governance structures;
too heavy reliance
on participating banks;
limited transparency
and accountability.
As a solution and to
restore credibility, Martin Wheatley suggests to transfer, through a
tender process, LIBOR administration and governance from the BBA to a
new administrator. This new administrator should be a private
organization rather than a public body. The reason is that a private
company will “have a greater incentive to ensure that the
benchmark is fit for purpose and evolves to meet the changing needs
and nature of the market”. However, rules and guidance for such
private administrator shall be set by public authorities.
It will be up to the new
administrator to design an internal governance framework. However,
the report already specifies the following 2 main features of such
future framework:
The benchmark
administrator will be obliged to analyze and scrutinize submissions
from contributing banks.
The framework must
provide for an independent committee which shall exercise a
decision-making and oversight role.
In addition to the
governance framework, a code of conduct for contributing banks shall
be put in place. This new code of conduct, endorsed by the FSA, must
include guidelines
for the use of transaction data to determine submissions, while
retaining the existing definition of LIBOR based on unsecured
inter-bank lending;
detail the above
described hierarchy of transaction types;
provide for internal
and external control of submitting firms;
request a record
keeping of transaction data.
4. Are there
alternatives to LIBOR?
The Wheatley report
suggests to think about alternatives to LIBOR benchmarks:
Lawyers should
develop feasible and robust LIBOR contingency provisions in
contracts such as ISDA and LMA. The Wheatley commission criticizes
the fact that those provisions usually refer to a mechanism that is
based on interrogations of reference banks. In its view, this not
only questions the practical feasibility in terms of work-load but
may also involve exactly the same banks that were not able to
provide LIBOR submissions in the first place.
Astonishingly, the
Wheatley report suggests to reconsider the use of LIBOR in
situations where it might not be the most suitable benchmark. For
example, the authors consider that there may be no
need to refer to LIBOR in derivative contracts intended to manage
interest rate exposure. Possible alternatives to LIBOR can be the
central bank policy rate, overnight index rates, overnight index
swaps, short-term government debt yields, REPO rates, or synthetic
rates.
5. How should we
accomplish the transition period to new regulation?
The
authors argue that the necessary amendments to LIBOR should come into
force in 2013, together with the Financial Services Bill.
6. Which sanctions
should encompass the new LIBOR fixing?
New enforcement
mechanisms and sanctions should be introduced.
First the report thinks
highly of EU legislation on market abuse that is currently under
review. The central point of today's reforms is to expand the
definition of a market abuse to providing false or misleading inputs
or otherwise manipulating the calculation of a benchmark.
Second, the report
recommends to introduce, at UK level, additional criminal sanctions
into the Financial Services and Markets Act (FSMA).
The introductory story
shows that setting and applying law are not same.
The Wheatley report is a
about setting the structure. For example, the word “process”
appears 90 times, more than once per page! Applying it will be
another story.
In my view, the report
focuses too much on the procedural aspects of setting LIBOR. In the
end, it is employees who will submit LIBOR quotes. They must
understand the obvious conflict of interest they were exposed to and
handle it properly. Besides the usual call for education and
training, the report is pretty silent on this issue.
Resources:
- The Wheatley Review
of LIBOR – Final Report – September 2012
